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Germany's SAP to make McDermott sole CEO from 2014

CEO of German software group SAP Bill McDermott attends the company's balance sheet news conference in Frankfurt January 25, 2012. REUTERS/L
CEO of German software group SAP Bill McDermott attends the company's balance sheet news conference in Frankfurt January 25, 2012. REUTERS/L

By Maria Sheahan

FRANKFURT (Reuters) - German software maker SAP AG is breaking up its dual-CEO structure and giving sole executive power to Bill McDermott, only weeks after his co-CEO Jim Hagemann Snabe defended the power-sharing structure in a newspaper interview.

Hagemann will move to SAP's supervisory board in a rejig which comes two months after the group announced a management revamp to sharpen its focus on "cloud" computing, a hot area for SAP and its rivals which allows clients to ditch costly servers for network-based software and storage in remote data centers.

McDermott, a 51 year-old U.S. citizen, was promoted to SAP's executive board in 2008, having run sales first in the Americas, then also in Asia, and finally worldwide since joining the company in 2002.

Under his and Snabe's leadership, SAP raised its market share in the key North American market, helping increase group revenue 44 percent to 10.7 billion euros in 2009 and to 16.3 billion by 2012.

McDermott's elevation to sole CEO may also shift the focus of SAP from its German home market to the United States. Snabe is based at the company's headquarters in the German town of Walldorf near Heidelberg, while McDermott's main office is at SAP's North American center in Newtown Square, Pennsylvania.

Snabe, 47, who brushed off criticism of SAP's dual leadership in an interview with Handelsblatt newspaper earlier this month, said he was stepping down from management after a 20-year career at SAP, including three years as co-CEO.

He cited personal reasons and said he had no plans to take on a management position at another company.

"We have done great things, ... got through the global economic crisis and ... made SAP a highly innovative and profitable company again," Snabe told Frankfurter Allgemeine Zeitung in an interview published on the paper's website.

The enterprise software industry is being reshaped as SAP and rivals such as IBM and Oracle Corp rush to meet surging demand for cloud computing.

INCREASED FOCUS

Since taking office as co-CEOs in 2010, with contracts that were due to run through 2017, McDermott and Snabe have spent more than $14 billion on acquisitions to expand in mobile and cloud-based services.

SAP splashed out $7.7 billion last year to buy Ariba and SuccessFactors to push into cloud computing, which research firm Gartner has said is expected to grow 18.5 percent this year to $131 billion worldwide.

To increase its focus on this area, SAP said in May it was grouping together all its development activities under the command of executive board member Vishal Sikka from June 1.

Last week, though, SAP trimmed its sales outlook for this year, citing a slowdown in demand in Asia and the rapid shift to cloud-based services.

Some analysts said it was slightly negative that reshuffling of SAP's management was continuing, but said they did not expect McDermott to pursue any major change in strategy.

"McDermott is the sales machine ... the products that are in the pipeline will continue to be pushed," analyst Marco Guenther at savings bank Hamburger Sparkasse said.

The company has also been looking for a candidate to take over from finance chief Werner Brandt, who is due to leave when his contract ends in June 2014.

SAP recently launched a cloud-based version of its HANA tool, which helps companies analyse large quantities of data quickly and competes with Oracle's Exalytics as well as a new version of its Business Suite software running on top of HANA, which it started offering in mid-May.

The proposal for Snabe to move to the supervisory board will require the approval of at least 25 percent of shareholders at the company's annual general meeting next May.

Shares in SAP were down 1.2 percent at 55.09 euros by 1017 GMT on Monday, the second-biggest faller in a flat blue-chip DAX index and not far from a nine-month low of 53.63 euros set earlier this month.

(This story removes repeated word from first paragraph, corrects typographical error in ninth paragraph)

(Additional reporting by Jonathan Gould, Natalia Drozdiak and Hendrik Sackmann; Editing by David Holmes and Erica Billingham)

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